Manufacturing Rebound Boosts Industrial Sales And Rents 2Q2024 Knight Frank
Singapore’s industrial property sector is seeing a rise in sales activity, according to a recent report by Knight Frank. In the second quarter of 2024, there was a 34.7% increase in transactions, totaling 509 deals worth $949.6 million. This is a significant 25.1% increase from the first quarter of 2024. The boost in activity can be attributed to a rebound in the manufacturing sector, with estimates from the Ministry of Trade and Industry showing a growth of 0.5% year-on-year and 0.6% quarter-on-quarter. This is a reversal from the previous quarter where there was a contraction of 1.7% year-on-year and 5.3% quarter-on-quarter.
Calvin Yeo, head of occupier strategy and solutions at Knight Frank, says that the manufacturing sector in Singapore has turned a corner alongside the economy. This is due to international manufacturers continuing to invest in the country for the promise of stability and access to Southeast Asian markets.
In addition to the increase in sales, industrial leasing volume also saw a boost of 5.9% quarter-on-quarter to 3,123 transactions in the second quarter of 2024. However, rental transaction value remained relatively flat with a 0.5% increase to $28.7 million. Yeo attributes this muted growth to occupancy pressures in certain market segments. On a year-on-year basis, industrial leasing volume decreased by 5.3%.
In terms of industrial rents, there was a 1.4% increase in the 25th percentile and a 4% increase in the 75th percentile in the second quarter of 2024, but the median rent decreased by 2.2%. For warehouses, rents in the 75th percentile reached a record high of $2.88 per square foot per month (psf pm), driven by growing demand for prime warehouse space in the Central, East, and West regions, as well as an increase in cold storage space.
Business park rents also saw an increase across all three percentiles, with the 25th percentile reaching $4.07 psf pm, the median reaching $4.51 psf pm, and the 75th percentile reaching $5.48 psf pm. Yeo notes that Singapore continues to attract international firms looking to establish a base in Southeast Asia. For example, pharmaceutical giant AstraZeneca recently announced a $2 billion investment in a new manufacturing facility in Singapore, set to be operational in 2029.
The data centre industry is also seeing further investments in Singapore. In June, Google announced an increase in its infrastructure investment in the country to $6.7 billion with the completion of its fourth data centre, while ST Engineering broke ground on a new $120 million data centre.
The growing adoption of electric vehicles (EVs) is also expected to drive manufacturing output, with an increase in demand for vehicle parts and charging infrastructure. Currently, one in three new cars registered in Singapore is an EV, and there are 7,100 charging points available across the island.
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According to Yeo, key manufacturing metrics point towards a more positive outlook in the second half of 2024. He believes that this will support prices, rents, and occupancies across most industrial types, with anticipated growth between 3% and 5% for the year.